Capital Gains Holding Requirements
Capital Gains - The factors which determine whether or not timber income qualifies for capital gains include:
The primary purpose for which the timber was held;
The length of time (Capital Gain Holding Period Requirements) the timber was held before disposal which directly affects the capital gains rate;
The form of disposal; and
You have a capital gain if you sell the asset for more than your basis. You have a capital loss if you sell the asset for less than your basis.
Capital gains and losses are classified as long–term or short–term. If you hold the asset for more than one year before you dispose of it, your capital gain or loss is long-term. If you hold it one year or less, your capital gain or loss is short-term.
If you have a net capital gain, that gain may be taxed at a lower tax rate. The term "net capital gain" means the amount by which your net long–term capital gain for the year is more than your net short–term capital loss. The highest tax rate on a net capital gain is generally 15% (or 0%, if it would otherwise be taxed at 15% or less). Please refer to the Capital Gain Holding Requirements for more information.
There are 3 exceptions:
- The taxable part of a gain from qualified small business stock is taxed at a maximum 28% rate.
- Net capital gain from selling collectibles (such as coins or art) is taxed at a maximum 28% rate.
- The part of any net capital gain from selling Section 1250 real property that is required to be recaptured in excess of straight-line depreciation is taxed at a maximum 25% rate.
If your capital losses exceed your capital gains, the amount of the excess loss that can be claimed is limited to $3,000, or $1,500 if you are married filing separately. If your net capital loss is more than this limit, you can carry the loss forward to later years.
Additional information on capital gains and losses is available in Publication 550, Investment Income and Expenses, and Publication 544, Sales and Other Dispositions of Assets.